Q2 2019 Earnings Call
Greetings welcome to Kosmos energy.
Second quarter 29.
An earnings call at this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation setting, which you require operator assistance during the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to your host Jamie Buckland you may begin.
Thank you operator.
Thanks to all for joining us today.
This morning, we issued our second quarter earnings release, and a slide presentation today to accompany todays call.
Thanks materials are available on the investors page of the Cosmos energy Dot Com website.
We anticipate filing our 10-Q for the quarter with the FCC later today.
Joining me on the call today to go through the materials on the Ingles, Chairman and Chief Executive Officer.
And Tom Chambers, Chief Financial Officer.
Before we get started I'd like to mention that this conference call will include certain forward looking statements.
Based on our current expectations.
The risks associated with forward looking statements have been outlined in the earnings release and in our SEC filings.
We may also refer to certain non-GAAP financial measures in our discussion.
Management believes such measures are important in looking at the company's historical and future performance.
And these are commonly referred to industry metrics.
These measures are provided in addition to and should be read in conjunction with the information contained in our financial statements prepared in accordance with GAAP and included in our SEC filings.
At this time I'll turn the call over to Andy.
Thanks, Jamie and good morning, everyone.
I'd like to start the call by reinforcing the key characteristics that define kosmos is unique investment proposition.
They are consistent with the themes, we outlined at our capital markets day in February .
First cosmos its business model is highly cash generative.
And the second quarter, we delivered approximately $136 million of free cash flow, we're on track to deliver over $200 million and 2019 at current prices our third year in a row of positive free cash flow.
For context in 2019. This represents a free cash flow yield of around 10%, which is very competitive compared to other NP companies and indeed other sectors.
Thank you and our infrastructure led exploration or I'll ex program is working.
They go out and be well brought the first success in the second quarter and through the rest of the year, we expect to drill for iOS six wells in the Gom and EGI targeting a total net resource around 125 million barrels oil equivalent.
Third we continue to add value to our Mauritania and Senegal asset base. Our recent appraisal drilling further expanded the resource at Tortue and we continue to make good progress with the sell down of our positions around 10% the scale and quality of the asset so glad to significant industry interest on the process remains on track.
Fourth creating transformational value through basin opening exploration remains a key part of our business, we have a deep diverse portfolio of oil and gas opportunities, which we will continue to mature high grade in test.
Later this year, we'll drill the orca well in Mauritania and expect to drill two basin opening tests per year from 2020 onwards.
And finally, our conservative approach to managing the balance sheet has not changed in April we opportunistically refinance our bonds that were due in 2021 pushing out the maturity until 2026 balance sheet strength continues to be a strategic asset of cosmos.
Turning to slide three I'd now like to discuss the second quarter Kosmos had record production during the quarter with our entitlement share averaging approximately 71000 barrels of oil equivalent per day.
In Ghana second quarter gross production averaged 97000 barrels of oil per day at Jubilee and 59000 to 10, resulting in the plan two cargoes from Jubilee and one from 10.
Jubilee the partnership is planning to accelerate the gas enhancement projects into the fourth quarter of this year.
Implementation of these enhancements should increase gas handling capacity to above 180 million standard cubic feet per day, thereby lying all production to increase in the fourth quarter and into 2020 .
At 10 as the operator previously reported completion problems were experience to the E and 14, well due to mechanical issues, resulting in the well not being completed.
In addition, there is the potential for two other 10 wells to be deferred.
These mechanical issues and the potential deferral of 10 drilling has reduced our full year X spine stations for the field and we now expect to live for cargos from 10 down from the previous expectation of five.
Right.
The 26400 barrels of oil equivalent per day net average daily production in the second quarter was a record for the gun business unit demonstrating the growth in the business since acquiring the last year.
The quarter on quarter increase was primarily driven by increased production at our job, where where we were able to take advantage of spare capacity aboard Delta House and the tornado field coming back online after his planned Drydocking one Q.
Performance in extra again, a during the quarter was in line with expectations, our electrical submersible pump or his P. program is ongoing with two further SP installations this quarter.
In addition, a stimulation program MCU may has recently begun and facilities upgrade program is currently underway to enhance the accumulate facilities in support of the 2020 and 2021 SP program.
These are low cost rapid payback projects and the 2019 DSP program has delivered cash payback in excess of 120% of invested capital in just seven months.
The strong production performance translated into approximately $136 million of free cash flow during the quarter, we remain on track to exceed our $200 million free cash flow forecast at current prices for the full year.
And finally, we paid a four and a half cent dividend during the quarter and announced our third quarter dividend today payable in late September at 18 cents for the year. This equates to a yield of around 3% at today's share price.
Turning to slide four as I mentioned in my opening remarks, our IR ex program is off to a great start and we expect first oil from gladden the around six months from discovery.
Our inventory of high quality prospects in the gone was broadened through our participation in the March lease sale.
During the second quarter Kosmos was awarded all nine leases, where we are apparent high bidder.
With these new awards, we now have approximately 80 blocks in total with over 30 prospects equivalents more than five years of future drilling activity.
The second half we have an active ilex drilling program in the Gom and plan to drill three of these prospects, which I'll talk about in a minute.
In actual Guinea, we're planning to drill our first well targeting the G. 13 prospects.
We have now contracted rigs drill as well, which is expected to spud late in the third quarter.
In Mauritania and Senegal phase one at the greater Tortue Ackman project remains on track falling Efiling in December .
Pre feed work on phases, two and three is ongoing and recent drilling results have further expanded our significant resource base, a greater tortue afternoon.
The sell down process, we announced in February is progressing well as world class resource base has garnered significant industry interest we expect to announce a transaction by year end.
Turning to slide five.
This slide shows our infrastructure led exploration program in action.
Gladden, Dave maybe the smallest of our 2019 prospects, but its still meaningful and demonstrates the speed to first production and cash flow contribution of our growing IMAX portfolio.
We expect to deliver incremental net production to Kosmos of approximately 1100 barrels oil equivalent per day around six months from discovery.
The economics of the while a very attractive at $60, Brent and where the 10 dollar 50 per barrel FMD cost and seven dollar 30 per barrel lifting costs. The well has a full cycle full cycle hierarchy of around 70% with payback expected in around 14 months from first oil.
Opportunities like Gladden deeper precisely why we entered the Gulf of Mexico, and we look forward to more success as the ramp up activity in the second half.
Slide six shows this activity in more detail, we plan to spud Moneypenny and resolution in October followed by our field in November .
In total these three wells will tax approximately a 100 million barrels of net oil resource greater than our current 80 million barrel oil equivalent to be reserve base in the gone.
So success at any of these wells will be meaningful.
Interestingly in on oil field, specifically, we're in the process of finalizing across assignment of our interest with Hess on the adjacent block with Kosmos taking a 40% interest in the two blocks and has 60%.
As a result of new seismic data that has has protest in the area. We now believe that there could be significant upside to the 30 million barrel oil equivalent we initially talked about.
Oil fill is another example of Kosmos is strong license to operate within the Gulf of Mexico. After move with much larger payers like Hassane VP with all fail, we plan to operate the prospect on behalf of past drilling exploration and the initial development phase.
One important point to note.
Each of these three prospects is located near existing infrastructure, which is available capacity is successful. The discoveries can be brought online quickly. The wells have an average staff and the cost of around $12 per barrel and an average lifting cost of around $6 per barrel and with oil prices of only $60 per barrel brand generate average full cycle IR ours around 50%.
There's a lot of all yet to be found in the deepwater gom and an abundance of underutilized infrastructure as I've said in previous presentations I don't believe as ever been a better time to be active in the gum.
We plan to take advantage of this attractive backdrop and a growing opportunity set by drilling four to five ilex wells a year targeting 65 to 100 million barrels oil equivalent of unrest net resource each year.
Turning to slide seven aligned to discuss another highlights opportunity. This time in the G. 13 area an extra beginning this is a unique opportunity around our legacy discovery.
The G. 13 field includes four previously drilled wells three of which were successful.
The wells drilled to date have proved up around 25 million barrels of oil equivalent with a 500 meter oil column.
Today, we have a calibrated well database and in 2018, we acquired a new seismic survey.
The previous wells were drilled off a 1999 vintage seismic survey.
The new surveys given as a much clearer image of the depositional system that delivered reservoir sand into the prospect area.
It's better resolution as enhance our understanding of the Trump model.
The new information is being key and identified that the previous wells were drilled on what we now believe to be the edge of the main reservoir channel.
Providing considerable upside to the discovery.
This together with a stratigraphic element increases the resource potential to around 200 million barrels gross for the field.
The first well will test around 50 million barrels gross and expected to spud in the third quarter.
Slide eight shows the significant progress we continue to make in Mauritania and Senegal.
With our partners, we are building a major LNG business across the basin.
With 50 to 100 Tcf of gas initially in place. We believe we have enough gas to underpin three separate 10 million tonne per annum LNG hubs.
The innovative development scheme, we're using a greater tortue ACMI and can be replicated for the other two hubs barela and the acas our anger using a design one build many approach.
Our exploration and appraisal activities. This year, therefore focused on first expanding our resource base at greater Tortue, Askmen, which we've done with the successful GCA one appraisal well.
Second defining the development area and securing a second LNG hub at the ACA arent, Senegal, where an appraisal well is plants, but next month after the rig completes in BMP and rise in maintenance and third underpinning. The next LNG hub in Mauritania, Barela, we which we hope to do with the Orca, well, which we expect to spud in October .
And as I said in my opening remarks, the sell down process, we announced in February is progressing well and we expect to downsize transaction by year end.
Turning to slide nine I'd like to highlight the substantial change in our shareholder base over the last two years a shift a mirror is the rapid evolution of our business over the same period.
In June Blackstone sell their remaining position in Kosmos Blackstone was one of two founding shareholders and post their exit and that a warburg pincus earlier. This year, we now have almost a 100% free float and any private equity shareholding overhang is all but gone.
Today, we have a more diverse broader set of public equity investors.
With that enhance float us assets and the U.S domiciled, we believe Kosmos should soon be eligible for more meaningful index inclusion with the benefits that will bring to our shareholder base.
We've included the guidance for the third quarter and full year and an an appendix to the presentation and we encourage you to look at that when modeling the business for the rest of the year.
So turning to the final slide.
In summary, Twoq was a record quarter for Kosmos with production EBITDAX, both over 50% higher compared to the same quarter last year.
This significant growth over the last 12 months has been done with only a modest increase in leverage perhaps most importantly for our shareholders with minimal dilution.
With the company's strong cash generation, we expect leverage to move towards our target range of one times to one and a half times.
And we look forward to a very second a very busy second half that is full of exciting catalyst many of which could be transformational for the company.
Thank you and I'd like to turn the call over to the operator to open the session for questions.
Thank you you would like to ask a question. Please press star one on your telephone keypad.
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You May press star to if you would like to remove your question from the Q.
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Our first question is from David.
Brown with BMO capital markets. Please proceed with your question.
Good morning, Andy just a couple from me.
The first one on Ghana.
We're able to add any further detail on drilling plans, there thinking, particularly 10, following a 14 well.
And how do you currently see the shed you for the rest of the year and into 2020.
And second question in the Gulf of Mexico, obviously, quite a strong quarter and you've now added clarity, which looks like its going to contribute this year. So how do we think about production in the second half and what's your confidence around the full year guidance.
Okay. Thanks, David.
I think on Ghana, it'd be good to give you a sort of.
A full view of what we think the second half could could look like.
You know, we're obviously disappointed that we couldnt can play the.
Ian 14, well.
And we support the operator's decision to take a timeout.
That previously being problems on the prior well and 10, where that completion was delayed by by a month. So I think taking a timeout on 10 is actually the right thing.
To do and we need to come back with a planned for in 14 months, the Rhine remediation and I think we also need to come back with a.
An appropriate design for drilling and completing that we're confident can be delivered on time on on budget I think it's important to emphasize on time. This is an operational issue another today with the reservoir.
The the reserves are there we just need to make sure we can get out of them in a cost effective way.
What it actually means I think from our perspective is the rig will work on.
On Jubilee for the rest of the year.
We're about I think the startup.
Producer on the on Jubilee J.J. 23, I think there's some maintenance than planned maintenance on the rig and then I think there's a series of Recompletions that would take you through to the end of the year. So the combination of that additional well capacity at Jubilee together with.
The increase in the gas throughput.
On Jublia to above 118 million standard cubic feet should give us a sort of strong production on Jubilee and good exit rate for Jubilee full four for the year end and into 2020 , including from a Kosmos perspective, that's important we have a.
The largest share in jubilee than we do in 10. So it's important that we maintain a strong production base in in Jubilee.
So I think that's sort of the Ghana store in Gambia, we're very pleased.
The businesses.
Has outperformed our expectations outperformed our expectations, obviously, when we made the acquisition it was a record quarter in production and then.
Through the year end, we've got two more wells starting up Latin the.
Nearly headless, Nick which means that we should exit the Gulf.
With a strong strong exit rate in in for Q. So.
I think the gulf's, it's been a strong performance.
And as.
It has obviously contributed to mitigating some of the impact of.
10.
And.
You know I'm I'm genuinely.
I feel pleased about the business we're building there from all dimensions in obviously, it's great team.
We managed to seize on I think the opportunity to get in some great prospects through the licensing round and through a deals that we've done with some of the larger companies brought the the cosmos brand to build and as I said in my remarks, we've got.
Five year drilling inventory build value, which is pretty neat given the acquisition is.
Less than a year through so it's been a strong start from from all dimensions and they're going to go.
Great Thats really helpful. Thanks, and great. Thanks.
Our next question is from James Carmichael with Macquarie Group. Please proceed with your question.
Hi, good morning.
Just one.
Gulf of Mexico, just interested then.
What's kind of resorts, you think you need to discover at resolution.
Sure that is.
Thanks.
New production hub, rather than sort of simply tying it back to the connections and then also just in the event of it.
That resolution well doesn't work.
Would you still consider the capital back in Q4 et cetera as.
Drillable targets further in the future. Thanks.
Good questions James.
I think it's important to look at the Standalone versus a new build.
So as a standalone, new bill versus Gunnerson I think is something.
Could be pursued almost irrespective of the scale.
Yes, the gunderson sponsors are.
Would be an opportunity for us to use existing infrastructure I believe it would have the capacity even with sort of full success at a resolution and the surrounding.
Prospects came in so I don't think its a scale thing I think is ultimately around what is the most economic decision full life of economic decision in terms of utilizing gunderson potentially de bottlenecking it or is it about bringing in a new build and so I think and the good news is we've got Optionality that we could go either route and I think both are valid today.
And.
Resolution, we have it around in our 150.
Million barrels and then this surrounding prospectivity, we could have up to sort of half a billion barrels gross so this is a significant opportunity for us and.
You know if resolution were not a success I think it's about individual prospects it will not be.
The.
The area itself, obviously in the Gulf of Mexico, It will probably be around trap and therefore to Sioux falls et cetera through the ongoing prospectivity is still valid. So we like the area, we like the scale and we like the ability with success to be able to tie to move forward with development quickly and that to me is the thing that distinguishes the economics in the Gulf of Mexico. It's the time to production ultimately, which is driving the high IR ours, and we would want to retain that optionality with success on resolution.
Very helpful. Thanks, a lot.
Right. Thanks James.
Our next question is from Richard Tullis with capital one. Please proceed.
Hey, Thanks, Good morning, Andy Congrats on a nice quarter.
Looking at the.
The LNG Torre to sell down process.
Or bid still expected.
The late summer at this point.
Yes, Richard we now it's been actually it's been a busy couple of months I'd say on.
On Mauritania, and Senegal, and sell them process we.
We announced that obviously in may.
Set of the data room and the level of interest in the industry has been it's been significant which is a plus and the minus that means there's lots of people going through the data room water management presentations.
To work and that's the process we have been working on so we've had interest Myers season, I would say is trading houses been interesting to me to see the diversity of the strategic interest in the assets and I think that to me is the real driver.
The the importance of gas actually gases as transition fuel.
People's portfolios, not being balanced out as they get access to it and those are being the conversations that we've been in so we're working our way through that process. We are on track to get it all done and therefore, we sort of remain on track to.
Have we hope a transaction that we can announce by the end of the year lot of work being done on a lot of work to be done, but the level of interest that we've had in the process is really been been strong and therefore, we're hopeful that the by year end, we will have a transaction that we can announce.
Okay, that's helpful and.
When you look at a potential transaction, what sort of structured credit take what would you be looking for mostly cash in a deal or.
What would the parameters look like.
Yes, I think it's early days to talk about and I think you just sort of I think hopefully you'll respect.
My position wish to say look this is a competitive process different people will have.
Different views and therefore put different value on different aspects of it so I think.
It's too early to say exactly how we're going to structure the deal, but I think that you are trying to push the fact that the you know.
We believe with the discovered resource there is implies a project that is moving forward.
Phase one phase two and three in Tortue, a strong cash element is an important part of the bed and I think that's.
That's clear that Thats, an important part of the the transaction for us equally while there are some pieces that are not fully described today I think there is significant upside to the resource base in in Mauritania for instance, so how do we end capture capture that and there are mechanisms in which we can do that so I think you are right to look at it as being a a combination but I think the.
The.
You know things move when we find it in December we have a real project moving forward is real value real cash flows underpinned by resource with an appraisal well.
On greater Tortue akamai him that underpin that resource so I think the cash element of that is.
It's an important part of the of the transaction.
And Thats also helpful and I do appreciate the sensitivity there and just lastly.
How much downtime, we have factored into the Gulf of Mexico third quarter guidance range.
We have sufficient.
We just to give you.
On an indication.
The.
Let's say, it's a boundary.
The.
The impact of Barry on a full year basis was 400.
Barrels of oil per day, there and so we have built in that plus.
An incident.
Plus another event of a similar size. So I think we're well covered in terms of the.
The impact from Hurricanes right Andy will that's all from me. Thanks, so much great. Thanks.
Our next question is from Neil Mehta with Goldman Sachs. Please proceed.
Hi, Thank you very much I guess the first question is you're getting to a period, even though at a lower oil price environment, where we see a substantial amount of free cash flow generation of a model and maybe spend some time talking about allocation of that free cash flow and how how much you want to return to shareholders versus reinvesting in the business.
Yes. Thanks, No I think we've been clear on this I think in the capital markets day and.
You know I think were.
We're clear on on following through on that plan I think first off it's good for you to recognize the the strong free cash flow from from the company, which I think is distinctive and it's something that we are absolutely.
Focused on that's what Tom and I are primarily focused on ensuring that we deliver on there and it's good to see twoq come through strongly.
You know, we're paying a dividend.
We've announced in the 18 cents per year.
And we've sort of announced that it would grow in line with the the growth in the business. So I think we've been clear about the the return of the.
Cash to shareholders through the dividend and I think the the Nextraq then for the.
The cash delivery will be to bring the leverage down into our target range you know.
We're sitting as we showed on the view graph around on a sort of.
Backward looking basis around to it our objective at year end is to get to the one to one and a half.
It's always get by year end to get to 1.7 to 1.8 on a journey to get to one to one and a half. So I think you know and the balance sheet strength has been a distinctive part of Kosmos is strategy, it's allowed us to be opportunistic when opportunities of.
Made themselves available and I think looking forward meal, I think there will be opportunities from.
The organic.
Success that we have in our we talked about the drill out in the Gulf of Mexico.
In our success across all three of those prospects is significant in terms of the opportunities. It will present, a business and clearly we have been opportunistic around.
Inorganic opportunities, but I think.
Throughout the first thing is confidently underpin the dividend and confidently bring the that that down into the target range of one to one and a half.
Current prices excluding the.
Any proceeds in Mauritania, Senegal, where we're going to be at 1.7 to 1.8 by year end.
I appreciate that and a follow up question is.
Is this BBC Panorama story on Sonic Ali I think you guys have been very public as well as the key in your response to it but can you frame out that risk for investors who were on the call. Because it is something that does come up and by virtue of Hugh killing conviction around the Tor two asset sale I would imagine that.
That you feel like that's still on course and wont be disruptive from these headlines, but I wanted to give you a forum to respond.
Now let me I appreciate you.
Asking the question I think you know.
We were very clear in our response to the program. We feel it is a inaccurate and misleading for trial of our business and.
In Senegal.
You know BP has been equally clear.
And so has the government of Senegal.
And as far as the government Ascendant goal is concerned they are very focused on the governance of the sector.
Which kosmos fully supports.
They recently being bright clear.
Through there.
The root cause.
Patrick Patrick gas.
The DNC, which governs the sector, there's absolutely no intention to question the licenses that have been issued too.
To Kosmos SOBP and in fact, you know the government is very much focused on ensuring that the project moves forward.
And.
And that is.
The most important thing we talk to with with potential buyers as they come into the into the data room is the the the project is absolutely proceeding as planned.
The progress made on on phase phase one in terms of the contracts being less steel being caught a number of provocation occurring and the pre feed work thats occurring on phases, two and three so you know nothing has changed.
Appreciate it guys.
[noise].
Our next question is from Bob Brackett with Alliance Bernstein. Please proceed.
Question around Ecuadorian DNA, and specifically slide seven I guess I'll start fairly specifically that fault block that you are targeting for EPZ. Five is the 50 million barrel target all within that fairway in that fault block.
Yes.
And then going broader I'll see what I'll get away with I see a number of both penetrated and Unpenetrated fault blocks and I see two fairways. One question would be what colour on that chart represents lowest known oil and how prospective do you think those two fairways are so if past five is successful what's the sort of scale of the follow on opportunity.
Yes, I think a good questions Bob I think that the.
I think if thats five is successful where we would go next is sort of is up to it we haven't got a cross section employees. If you went out that.
Which is going to the.
The.
The east on on that map, the the resource upside would come in from that up dips stratigraphic trap.
And that's where the new seismic data has actually allowed us to.
You know see additional resource.
And that Unpenetrated fault block east of the the G. 13 dash too is that perspective.
Yes. It is.
Okay, great. Thanks for that.
So yes, I would say look you get I don't want to get a good call. Good questions right. So I think we're targeting the first well and what we believe is the lowest risk.
Compartment.
Which is why the EPS five what is being targeted and then I think the now the success that allows us to have a.
A tie back which is economic and then from there with that in place. We can then test the the updated resource which would add.
Significant additional volume and I think the other.
The thing is to sort of recognize as I said in my remarks that the original wells were drilled off.
Seismic that was 20 years old actually 20 years old in.
And so you know the the step change in quality is huge.
So you know we have the ability to image it a lot better and clearly one of the reasons why this wasn't pursued in the.
In those days by Hess and actually our team actually was in the Triton days were involved in that Hanover would pass was because the other facilities were full.
Cyber and acumen there wasn't the space. So I think this is this is going to be interesting and I think you know there were there are other opportunities of a similar elk, we're starting to define now on the back of the enhanced data center.
Sorry to pester with one final one what do you think the economic cut off is for a viable tie back in terms of reserves.
Eight rounds, you know, it's around that 50 million barrel Mark Yeah. It's around the 50 million barrel Mark Yeah, you know its more than 2 million out. So you know it's a good question, Bob and we haven't been out to bid at century, but in terms of where we are of all the pre feed work that we've done we would say it's around that 50 million barrel market great. Thanks again.
Great. Thanks.
Our next question is from Al Stanton with RBC capital markets. Please proceed with your question.
Yes, hi, good afternoon, guys. It's very quick question on Gulf of Mexico, You mentioned, a number of times I think the top.
You've got an inventory of drilling targets for the next five or six years. So does that mean, you'll play to funnel with respect to exploration and any new additions, we should anticipate in the Gulf of Mexico are very much focused on adding reserves production and cash flow inorganic.
[laughter].
Great question now I think.
I think we're in an enviable position I think we've built a really strong portfolio of opportunities we have access.
Really low cost.
And I couldn't be more pleased at the way in which we took advantage I think of a real lull in the Gulf of Mexico.
To do to do that it's interesting to see almost yeah post the acquisition sort of more interest now in the deepwater I think we can't we timed it.
We timed it really well.
You know.
And I actually think that will be inorganic opportunities that will come up I think you know then the majors I think a constantly reevaluating that that portfolios.
So I think you know the simple answer is to say anything that we had has to compete with the on the inorganic returns and I think we've demonstrated I think that those inorganic returns a pretty good.
So we have choices and its great to have choices and.
And I believe were not driven to do anything from an organic perspective, we will obviously look at things and if we believe the any new addition can match the high quality that we have internally and obviously, we would look at it and I think it's great to have built that foundation now so I think it's going to be interesting times in the Gulf of Mexico, but I think discipline discipline discipline is hugely important and.
Weve on and I think we've demonstrated that discipline.
Through our initial ownership and ER and growth in the Gulf.
Okay. Thank you good all right. Thanks.
Our next question is from Pavel managed channels with Raymond James. Please proceed.
Thanks for taking the question.
Got it so happens that this year youre drilling schedule.
Just for the company as a whole is very backend weighted where do you see happening for prospect.
Between September and November or something like that.
Are you going to be.
You mean that pace.
Our exploration activity in two.
2020 or is it just kind of a coincidence that Q4 of 2019 has such a large number of.
Our exploration prospect.
Yeah No. Good question, probably yeah, it's a little bit of it is just the the.
Obviously, if you think about it.
Three of the.
Yeah.
We have the five.
Okay, Yeah, and actually that we operated well Max.
So it really post the acquisition.
The building.
Oh, yes migrating it.
So we're doing the right things getting act.
Thanks to the resolution hub with.
We'd be paid.
Access actually in sort of equity progressing the equity conversations with hands on on outfield Moneypenny, we sort of always in the program, where it was but actually the two operated wells required us.
To get those deals done and get the rigs and the other point to mention is we use rigs of opportunities. So that we can get very good very good rig right and so we're not locked into a program actually of having to drive a rig. So I think this is a feature of the of the spool up.
Post the acquisition of the GE now once where we were clearly as I described guar.
Four five very strong prospect outlined for 2020 in the Gulf of Mexico.
So what you'll see is a more rate table.
And then the.
One follow on any GE will depend on.
Exam in.
In EG 13.
Hi.
And then we will time the basin opening wells.
As the.
As the down tools, so I think you'll see a more so the answer is you're going to see a more rate double.
Drilling.
Program through.
In 2021 built off the back solve them or rate full program itself.
Yes.
Okay.
That's helpful.
Back to the cash flow allocation question. If we just look at your Q2 numbers and annualized with.
Brent break Steve.
Hi, your stocks trading at around three times cash flow from operations, obviously pretty low multiple by any.
He standards I'm curious what your thoughts are on share buyback.
As an opportunity to.
Perhaps balance that out with de leveraging.
Yeah Weve.
We have you share buybacks in the past.
We obviously a U store to.
Proportion of the acquisition of the DG.
And we brought all that back as Tom what a 40%.
Discount.
Actually too.
To addressed the the dilution in that deal and you know as we talked about.
You know we've grown the company by over 50% EBITDAX production quarter, a 29 to 29, saying that 2018.
Twoq you were minimal dilution. So we've used that opportunistically in a in that way you know, yes. It remains an option and I'm not going to rule without Pavel It remains an option I think we've been quite diverse and get the data in the Rhine twice and then you know it remains an option I think the.
After that so we don't rule it out.
For the used it in the past.
And.
And I think you know depending on the share price performance. It remains an option Tom would you want to add anything.
I think that kind of summarizes Andy.
Where we stand yeah and were clear the balance sheet strength for US is something that has been good for Kosmos since we went public in its helped US I think a distinguish ourselves in the sector in NAFTA dividend.
Alan Tse trend.
And then you know and I think and then you know share buybacks would be an option.
I appreciate it.
Thanks.
Our next question is from James Posey with.
His please proceed.
Hi, there good morning, good afternoon, depending where you are I guess, firstly on the Senegal, and Mauritania divestment I was just wondering the extent to which.
If you're drilling activity you're planning their reach to can meaningfully impact the sales process.
Yes. Good question James you know nothing.
Weve been careful in our remarks that.
You know we.
We anticipate having the the Orca result.
Before we were out.
I see a transaction so that's sort of what we believe would be the the outcome clearly if things were to accelerate there are mechanisms in which you can ah commercial mechanisms in which you can cope with that so it doesn't become a REIT determining step a.
It's simply want him one that we can accommodate.
Okay. So is it possible that you could see the timing of the announcement slip into next year just on the timing of activity.
No well could will now be able to resolve this year.
Okay, and then a second question I had on Jubilee and the gas three through enhancement plans you give us some color on the scale of the uplift our production capacity at Jubilee you expect to achieve from that.
Yes, so look if you will.
I don't want to get too much into the.
Into the engineering, but if you.
You know today the.
The gas handling is on Jublia is constrained to around 160 to 165, it's sort of it's in so.
We would hope to through the de bottlenecking get to 180 to 108.
The 185 say and then actually the uplift you get on the.
On the oil side will depend on the.
The.
Abolished.
Algeo are of a well.
But it.
What a 10000 barrels a day of oil production if you saw that.
That increase.
Okay.
Thanks, so much for that but from existing wells.
No new wells being brought on from existing wells.
It's material.
And the most important part is it sort of helps you going forward, it's a constant brick that you get.
Rather than if we won the sort of on decline.
Great very clear thank you.
Right. Thanks.
We have reached the end of our question and answer session I would like to turn the conference back over to management for closing remarks.
Great. Thanks, operator, we appreciate you all joining us on the call today and thanks for your interest in Kosmos. If you go any further questions. Please don't get incomes I hesitate to get in contact with me thanks very much.
Thank you. This concludes today's conference you may disconnect your lines at this time and thank you for your participation.
Yes.